Property Management: Law & Practice - Essay Example

? Property Management, Law and Practice Property management entails maintaining assets in proper condition to enable businesses to run smoothly in a secure and safe environment (Ho 2005, p.46). Leasehold ownership of property refers to long-term occupancy of the property with an absolute to enjoyment of the property in accordance to the agreement between the actual owner and the occupant. While at the initial stages the conditions for occupancy are invariable, these conditions fluctuate over time hence providing the parties to adjust the same in accordance to the prevailing market conditions (Greenhalgh & Rogers 2010, p.87). The leaseholders and landlord have duties to perform in regard to the agreement they signed between them (Blackburn 2003, p.37). Also, the parties have rights to enjoy from the leased property in accordance the law or as stipulated in the agreement. The property under lease can be sold or purchased during the lease period (Henry, 2012, p.143). Where a manager is appointed by the owners of the assets to manage them on their behalf, the managers are required to maintain proper relationship with the tenants and the landlord (Tuller 2008, p. 76). The property managers should keep owners property in a state that will generate maximum income for the landlord while increasing efficiency of operation for the leaseholders. Managers’ Fairness to Jacks & Co Rent review clauses offers landlords with an opportunity to vary rents payable by the leaseholders after some time, usually three to five years (Blackburn 2003, p.143). This enables the landlords to get the appropriate revenue from their premises. This clause also stipulates the time of making such valuations, the approach to apply when making review, and the assumptions underlying such reviews (Tuller 2008, p.151). In case the parties fail to agree on the new rental terms, they may seek intervention of a third party. Inadequate rent review may result to financial or legal consequences to the parties involved. In order to ensure proper management of property and avoid legal suits between landlord and leaseholder, it is essential for both parties to understand their obligations and the rights their envisaged in the law or in the lease agreement (Ho 2005, p.53). The rights of possession of the leased property include all that is inside the house including the floor walls and the ceiling (Blackburn 2003, p.48). However, the leaser is entitled to ownership of the roof, the land in which the house is built or any other external part of the premise. Legally, the owner of the premises is responsible for maintaining and renovating the structure (Henry, 2012, p.154). The parties to the lease agreement should be able to understand the terms of their agreements before engaging in any form of relationship. This may require them to seek clarification of the lease agreement contents from legal experts (Blackburn 2003, p.49). This is because, once the agreement has been effected, it is not easy to alter the content of the agreement hence parties should ensure that the conditions set in the contract are favourable to their circumstance. According to Landlord and Tenant Act 1954 the owner rather than the occupant is responsible for maintaining the external parts of the building including the roof and the common places shared by all the occupants such as lifts, corridors, lighting, and water system (Ho 2005, p.63). The property owners have obligation to maintain records of the occupants and the contributions they provide towards refurbishment and maintenance of the premises. According to the lease of property regulations, the occupant of the office is responsible for paying the rent of the house as stipulated in the lease agreement (Blackburn 2003, p.53). Therefore, in regard to this issue, all the occupants of the office suites in Birmingham are responsible for paying all rent when due in accordance to the terms set in the contract (Mattei 2000, p.64). The occupants have a responsibility to give a share of the expenses for maintaining and renovating the external structures to the building they are occupying to the owner (Ho 2005, p.76). The other service charges that are required from the tenant s include cleaner’s fees, insurance contributions, and security personnel fees and so on. Mr. Jack wants the property manager to reduce the rent of the property by twenty percent so that they can manage to clear future rents. This is because Mr. Jack feels that relocating the office to a cheaper apartment will incur the company additional expenses in relation to movement of the items. Since Mr. Jack is also convinced that they will be able to secure cheaper office elsewhere, the property manager should establish whether by lowering the rent of their premises by the requested rate of twenty percent will reflect the actual value of the property (Blackburn 2003, p.64). The manager should be aware that by lowering Jacks & Co will also require him to lower the rent for other offices as well (Henry, 2012, p.164). The manager should reduce the value to match the market rate though not necessarily the requested twenty percent (Ho 2005, p.94). This will benefit both the landlord and leaseholders. This is because, the tenants have been struggling with paying rent and if it is reduced they will be able to clear it on time. In addition, since only six out of ten office suits are currently occupied, reduction of the charges will attract more tenants like Mr. Gill hence generate additional revenue for the owner. Jacks & Co Company is facing financial hardships thus it is vital for the property manager to discuss with the management of Jacks & Co Company in order to decide on how the company is going to settle the outstanding rent and service charge. The best thing for the property manager to do in order to safeguard the interest of the property owner and at the same time show concern for the tenant is to examine the circumstance which led to inability of the company to be in such a financial difficulty (Mattei 2000, p.86). It is clear that the company is owned huge amount of money by their debtors, but it essential for the property manager to examine the potential of Jacks & Co debtors to repay the outstanding debts (Blackburn 2003, p.76). If there is evidence that such debts will be cleared within reasonable time to save Jacks & Co from going into receivership, then the manager should consider giving the company an additional time to clear her own debts without having to repossess the company. According to Section 146 of the Law of Property Act 1925, the manager can reclaim the office suite occupied by Jack and Co due to failure to pay the outstanding amount on time (Docherty, Forslin & Shani 2002, p.87). He can do so after serving the tenant with a notice of the same and giving the company adequate time to respond to the issue by either making necessary payment or preparing to vacate the apartment. However, the manager has to ensure that circumstances that resulted to inability to clear rent and service charges were not contributed by the owner of the premise (Blackburn 2003, p.85). In this scenario, the owner may have contributed to this condition by charging tenants higher than amount appropriate to cater for maintenance and renovation as well as rent that is above market value. The manager will have to consult LVT before making such decision of taking the tenants possessions as a result of failure to pay for the charges. The Leasehold Reform Act 1967 provide terms of use of the property hence both parties are restricted by those terms in regard to what they may do with the property and what they may not do (Blackburn 2003, p.94). This is the reason why it is very essential for both parties to understand the contents of the agreement in order for them to realize their rights and obligations in relation to the use of the property. If the property changes ownership from the current occupier to a new occupier upon termination of the previous agreement or expiry of the term of lease, the new occupier acquires full rights that were enjoyed by the previous occupier (Tuller 2008, p. 97). Therefore, Jacks and Co should pay the entire amount due in accordance to Landlord and Tenant Act of 1987. Managers’ Fairness to Mr. Jack The property manager executes the wishes of the property owners when dealing with the leaseholders (Crown 2012, p.3). Therefore, since the property manage would want to make as much revenue for the owner as possible, he may fail to implement the opinion of Mr. Jack. If Jacks and Co opts to relocate their office to a cheaper building, this will incur them huge expenses that would be avoided had the manager decided to reduce the cost of the offices (Blackburn 2003, p.102). However, Mr. Jack as the manager of Jacks and Co has a right to challenge the property owner to the LVT and compel him to reduce the rent and service charges to a reasonable value. The manager has a duty to protect the interest of the landlord, but should also ensure they treat their client with respect to ensure they continue with their operations without straining. The Leasehold Reform Housing and Urban Development Act 1993 grant the property manager authority to set new charges and rent to be paid by the leaseholders (Blackburn 2003, p.109).. The landlord has been charging leaseholders higher rent than the market value hence it is apparent that in case the current occupants vacate the apartments, the manager will be forced to lower house charges in order to attract new entrants. However, this will cause disturbances to the current occupants if they have to relocate their offices cheaper apartments. According to Henry, (2012, p.172) in order for the manager to show concern for both the landlord and tenants, he should reduce the value of charges as requested by Mr. Jack in order to match that of similar property in the same location. The issue of appropriateness or fairness in relation to the charges can only be determined in regard to the situation at hand (Blackburn 2003, p.63). Therefore, the manager has a right to request for the charges of the services from the tenants since it is evident that the roof has to be replaced because it is already leaking and may cause serious damage in future if it is not replaced. The other issue of fairness is in regard to whether the manager should replace the roof in the current year or postpone replacement to the following year by doing patching in the current year. It is better do immediate replacement since postponing will result to additional cost of patching in the current year. However, Mr. Jack should not use this opportunity to blackmail the property manager by offering to pay some cash immediately only if the property manager accepts to reduce future payments by twenty percent (Tuller 2008, p. 123). It an obligation of the leaseholders to pay reasonable amount for maintenance and renovation of the building without causing landlord anything. Question 2: Managers Action Mr. Gill wants an immediate office in the upper floor hence an immediate solution is necessary in this case to ensure the roof is replaced before the apartment become appropriate for occupation. Therefore, the property manager should replace the roof immediately in order to ensure the new entrants gets into offices that are in reasonable condition (Docherty, Forslin & Shani 2002, p.107). However, tenants have difficulties in paying for the charges and rent to the property owner. It is the occupants’ legal duty to pay for all the charges and rent at reasonable rate without defaulting (Blackburn 2003, p.111). The charges for these services should however be reasonable and he should provide tenants with book record of the expenses incurred. If any of the tenants is in doubts of how the amount was incurred, they can challenge the property manager before the LVT to examine the claim and determine the amount considered reasonable in this situation (Tuller 2008, p. 132). The manager will have to recover the cost of replacement of the roof from the existing tenants by including it in the services charges for the period in which it was incurred. Property Managers Cost Recovery According to the Commonhold and Leasehold Reform Act 2002, the manager should be aware that by reducing the charges payable by one tenant will result to reduction of the charges payable by other tenants (Tuller 2008, p. 165). In order to ensure all tenants are treated on equal terms, the manager should ensure fair value is paid by all tenants. The current rate of ten percent has to be restructured either upward or downward in accordance to what is considered appropriate. If the LVT determines that the amount charged by the property manager is realistic, then he is entitled to recover the full amount spent in replacing the roof and carrying out other renovations and maintenance services (Tuller 2008, p. 143). However, in most cases the amount spent when providing such services may not be easy to account for. Therefore, in such a case the property owner can not be able to recover the full amount spent, but will only recover the amount reasonable for providing such services according to the prevailing market value. However, the request by Mr. Gill to have the charges reduced should only be granted if by paying that new rate will be able to cover the entire expenses required for maintenance and renovation of the assets without addition more cost to the owner (Crown 2012, p.5). Therefore, the two parties should agree on the issue and in case one of them is not contented with the terms of transfer then there is no obligation for that party to agree to the terms of the other party (Tuller 2008, p. 197). Although it is appropriate for the tenant to pay for the charges in arrears according the agreed terms, there is an opportunity for them to vary the conditions whenever they feel they were not in favour of the tenants. According to the agreement, Landlords may raise service charges from the leaseholders in advance, but will be required to refund the leaseholders with the remaining amount after paying for the services, or they may have to ask them to pay for an extra fee in case the money spent for such services was greater than what the landlord had raised from the leaseholders (Tuller 2008, p. 265). Raising the service charges funds in advance ensures that landlords have ready resources for maintenance and renovation whenever necessary hence they will not bother leaseholders in case of emergencies. However, under such situation landlords are supposed to create a reserve fund (Suk, Chang Hwan & Jeong Chang 2000, p.99). This should be stipulated in the lease agreement and should include the amount leaseholders are required to pay at specific time and the duration when such services will be provided. The law requires leaseholders to pay for the service charges immediately when required by the landlords to do so or as stipulated in the lease agreement (Crown 2012, p.9). In case clients fails to pay for such charges when due, the landlord has a right to reclaim the building from the leaseholder. However, before the landlord can do this, they have to prove to the court that the amount they are asking for is appropriate for providing such services and that they are not oppressing the leaseholders (Docherty, Forslin & Shani 2002. P143). In case leaseholders feel that the amount charged by the have a right to challenge the land lords in the Leasehold Valuation Tribunal (LVT) who will assess the value of services provided by the landlord and the amount they claimed from the leaseholders (Suk, Chang Hwan & Jeong Chang, 2000, P.87). Therefore, the property manager acting on behalf of the landlord should recover all cost incurred during maintenance and renovation operations since tenants are liable for such costs. Incentives to Mr. Gill The tenants would like to stay in a serene environment where they can enjoy doing their work with minimal disturbances especially from external sources including the landlord (Crown 2012, p.7). For example, the occupants would not like interruptions such as those caused during renovations to be prolonged because this will interfere with their work. Therefore, Mr. Gill would like to settle in a well refurbished office in which there will be no much interruptions in the foreseeable future (Tuller 2008, p. 217). It is for these reasons that the property manager should replace the roof in the current period before Mr. Gill decides to settle rather than doing patchwork and cause disturbance when doing complete replacement of the roof in the following year takes place. This will assure Mr. Gill of full enjoyment of the property and will be encouraged to set an office in that building. According to section 27A of the Landlord and Tenant Act of 1985, both parties should adhere to the terms of the agreement in regard to the amount payable (Tuller 2008, p. 234). Therefore, Jacks and Co are liable for the payment of any outstanding charges or rent as long as the manager of the property can prove that the amount they charge for their services or rent is appropriate and fair. The manager should also set rent and service charges to reflect reasonable charges hence this will attract Mr. Gill and other new tenants. The occupants also anticipate the owner of the premises to continue renovating the exterior of premises and all other parts shared by the occupants of the building. Therefore, it is obvious that the owner of the building has a right to examine the condition of the building without committing trespass (Schmidgen 2002, p.176). However, the owner should ensure that they do not cause the occupants unnecessary disturbance during the period of inspection or refurbishment. Similarly the owners should not collect the money for refurbishment and maintenance of the premises and fail to perform the necessary services because this will be a breach of the conditions of the contract. The occupants should also ensure they provide the owners will chance to examine the condition of the premises and refurbish the premises whenever they are required to do so (Docherty, Forslin & Shani 2002, p.123). They should also ensure they pay whatever is required for maintenance, repair and the usual rental fees. Whenever the landlord feels they need to make some physical alterations to the buildings, they should always ensure they do so after informing the leaseholders of their intentions and after making appropriate arrangement on how to go about it (Tuller 2008, p. 248). This will enable them to avoid raising doubts regarding the charges for the services they provide in regard to maintenance and renovation. Mr. Gill and the other stakeholders should be allowed to enjoy their right to inspect the records maintained by the landlord in regard to the leased property. Therefore, any time the leaseholder feels that they require certain information regarding the transactions that have been taking place between them and the landlord, the property manager is obliged to provide such information as required by the leaseholder (Docherty, Forslin & Shani 2002, p.132). In order to ensure the leaseholder is in contact with the landlord all the time, the landlord should provide their contact address to their clients and should update them with any information they may require at any given time (Tuller 2008, p. 254). In case leaseholders intend to prolong their lease period or purchase the leased property, they can make an application to the landlord who should sell the property at a reasonable amount failure to which the leaseholders can challenge the landlord before the LVT (Crown 2012, p.6). On the other hand, if the landlord decides to sell the leased property, they have a legal duty to inform the leaseholders of their intention and offer them first priority to purchase (Schmidgen 2002, p.175). If the leaseholders are not interested in purchasing the property, it is then that the landlord can invite the outsiders to purchase the property. Conclusion Due to the effect of inflation, service charges are never constant, but vary from time to time. Therefore, service charges will increase or decrease over the years depending on the prevailing economic circumstances. The landlords should ensure they adjust those charges appropriately to ensure they reflect the actual market value for providing such services. This ensures the occupants are not overexploited by the landlords who may decide to increase the maintenance and refurbishment fees unnecessarily. The landlords have no obligation to pay for the cost of maintenance or refurbishment of the premises, but this is an exclusive role of the leaseholders. It is the role of the property manager or landlord to ensure all tenants enjoy serene atmosphere of the premises they occupy and that there is no unnecessary interferences to their possession. List of References Blackburn, R, A 2003, Intellectual Property and Innovation Management in Small Firms, Routledge, London. Pp.31-127 Crown, 2012, The Leasehold Advisory Service, Retrieved on 10th April 2013 from file:///C:/Leasehold%20Advisory%20Service%20%20%20Advice%20guides.htm Docherty, P, Forslin J & Shani A. B 2002, Creating Sustainable Work Systems: Emerging Perspectives and Practice. pp. 32-167 Greenhalgh, R 2010, Innovation, Intellectual Property and Economic Growth, Princeton University Press, Princeton, NJ. Pp.76-235 Henry, F, C 2012, A New Approach to Intellectual Property Management and Industrially Funded Research at Penn State: Research-Technology Management, Vol. 55(5).Pp.123-178 Ho, P 2005, Institutions in Transition: Land Ownership, Property Rights, and Social Conflict in China, Oxford University press, Oxford, England. pp.46-198 Mattei, U 2000, Basic Principles of Property Law: A Comparative Legal and Economic Introduction, Greenwood Press, Westport, CT. pp.45-187 Suk, O, H, Chang Hwan, K & Jeong Chang, S 2000, An Urban GIS Database Model for Integrated Land and Building Property Management: Michigan Academician Journal, Vol. 32(4). Pp.76-103 Tuller, L, W 2008, Finance for Non-Financial Managers and Small Business Owners, 2nd Ed, Adams Business, AVON, MA, pp. 113-276 Schmidgen, W 2002, Eighteenth-Century Fiction and the Law of Property, Cambridge University Press Cambridge, England. Pp. 112-243 William, W, C 2000, Percentage Rent in Retail Leasing: The Alignment of Landlord-Tenant Interests: Journal of Real Estate Economics, Vol. 28(2). Pp.56-87 Read More